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Over the
past six months, the dynamics of the typical equipment dealership
have changed. And that's putting it mildly. Interest costs
have increased by nearly 25 percent, fuel costs are up by
almost half, new equipment sales have fallen dramatically,
used equipment margins are under severe pressure, rental rates
have dropped to dangerous levels and the interest-bearing
assets the average equipment dealer has in inventory have
increased.
These
factors do not make for a good business environment.
So the
time is right for product support to step up and be counted
as never before in the past 30 years. The rate of increase
in profit contribution from product support must be greater
than the decrease in the profit contribution from equipment.
But it won't happen quickly.
To protect
your dealership, there are several areas you need to attack-and
quite quickly-to start down the path of positive change.
Customer
coverage. While the sales profile for parts and service
at most dealerships still follows the 80:20 rule-meaning that
80 percent of the business comes from 20 percent of the customers-in
some dealerships 90 percent of the business is coming from
10 percent of the customers. That means dealerships are losing
customers for product support. Nearly half of the customers
that were buying five years ago are no longer buying parts.
The service business has seen an even greater decrease in
customers. This is a very serious problem.
Very few
dealers track the retention of customers for parts and service.
Someone should review customer purchases on a regular basis
and contact customers when their buying pattern changes. If
you don't contact your customers to find out why they're no
longer buying from your dealership, they will assume that
you don't care. This is not the impression you want to give
them.
Product
support sales. Your dealership should have very in-depth
knowledge about the customers to whom you've assigned a product
support sales rep. Do they give you all of their parts and
service business? Do they have their own mechanics? What other
parts or service providers do they use? What do the customers
like about these other suppliers? How much of their parts
and service work does your dealership receive? Do you have
a strategy for regaining this business?
Too many
dealerships send a product support sales rep into the field
with insufficient direction or unclear goals and objectives.
How can your dealership obtain its rightful share if you don't
establish targets, in conjunction with the customer, for what
that share should be?
Service
sales programs. Selling a repair to a down machine is
not the answer-it's too late at that point. Dealerships must
develop and sell programs that help customers reduce the owning
and operation costs of their equipment: total maintenance
and repair, extended warranty, oil sampling, inspection and
appraisal programs.
Do you
have these programs in place at your dealership? It so, do
you have specific sales goals for each? A program without
a sales plan is not much better than having no program at
all. Establish goals with each of your sales reps and service
department and implement a plan to ensure these goals are
met.
Passionate
people perform. Your parts and service employees care
deeply about the success of your dealership. So get them more
involved in all aspects of the parts-and-service operation.
What do they think could and should be done differently and
better? What ideas do they have to increase sales, decrease
expenses and eliminate unnecessary tasks? You might be surprised
at the tremendous insight they have into how your dealership's
operations could improve.
The past
15 years or so has seen the imposition of business metrics
that were caused by the transition from high inflation to
low inflation in the early 1980s. That was a very painful
period. We shouldn't need to experience that pain again. Over
the past eight years business has been excellent for most
dealers, who consequently missed an opportunity by not aggressively
pursuing internal improvements and better coverage models.
Now that market conditions have seriously changed, most dealership
are behind the curve and trying to catch up.
I would
love to get ahead of the change curve. Wouldn't you?
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